NZD/USD prods yearly low near 0.6050 as RBNZ confirms easy LVR restrictions, US data eyed

• NZD/USD fades bounce off the lowest levels in six months.
• RBNZ’s Deputy Governor Christian Hawkesby confirms easing of LVR restrictions, NZ Consumer Confidence stays flat in May.
• Firmer US data, fears of US default underpin US Dollar demand.
• Slew of US statistics ahead to entertain Kiwi pair traders, US debt ceiling headlines are the key.

NZD/USD licks its wounds at the lowest levels since November as the Reserve Bank of New Zealand (RBNZ) announces the easing of lending restrictions on early Friday. Also exerting downside pressure on the Kiwi pair is the broadly firmer US Dollar and flat New Zealand Consumer Confidence. That said, the quote seesaws around 0.6060 by the press time after falling in the last three consecutive days to refresh the Year-To-Date (YTD) low.

"The risks to financial stability posed by high-LVR lending have reduced to a level where we believe the current restrictions may be unnecessarily reducing efficiency," said RBNZ Deputy Governor Christian Hawkesby while announcing the easing on the Loan-to-Value Ratio (LVR) restrictions.

On the other hand, New Zealand’s Consumer Confidence gauge slightly fell to 79.2 in May from April's 79.3, per the ANZ-Roy Morgan survey for May. "While the labor market remains tight, conferring both a high degree of job security and strong wage growth, the ongoing cost of living increases, including higher mortgage rates for the 38% of households who have a mortgage, continue to bite," ANZ Chief Economist Sharon Zollner said in a statement, reported Reuters.

Elsewhere, the second estimation of the US Annualized Gross Domestic Product (GDP) for Q1 2023 was revised up to 1.3% versus 1.0% first forecasts. Further, the Chicago Fed National Activity Index for April improved to 0.07 from -0.37 prior and -0.02 market estimations. On the same line, Kansad Fed Manufacturing Activity improved to -2 for May compared to -21 previous readings and analysts’ estimations of -11. It’s worth noting that the US Pending Home Sales for April improved on YoY but eased on MoM whereas Core Personal Consumption Expenditures also rose to 5.0% during the preliminary readings versus 4.9% prior.

Apart from the upbeat US data, looming fears of the US default also allow the US Dollar to dominate. Recently, US House Speaker Kevin McCarthy announced no agreement on the debt deal, as well as the continuation of talks by saying, “It’s hard. But we’re working and we’re going to continue to work until we get this done.”

Amid these plays, the US Dollar Index (DXY) rose to the highest levels in 10 weeks, to 104.20 at the latest, whereas the US 10-year and two-year Treasury bond yields rose to the early March highs of around 3.82% and 4.54% in that order. That said, Wall Street closed mixed but S&P500 Futures is mildly offered at the latest.

Moving on, multiple US data stand tall to direct the NZD/USD moves, apart from the US debt ceiling negotiations. Among them, the US Durable Goods Orders for April and the Core Personal Consumption Expenditure (PCE) Price Index for the said month, known as the Fed’s preferred inflation gauge, will be crucial to watch.

Technical analysis

A daily closing below an upward-sloping support line from mid-November, now immediate resistance around 0.6100, keeps the NZD/USD bears hopeful.